From Speculation to Practical Innovation: The Next Chapter for IP on Blockchain
I was several years into my time at Live Nation when myself, along with most others in the company, were put on leave due to the pandemic. There was, of course, good reason for this. In Q2 of 2020, there were only 24 concerts, compared to 7,213 in the same period the year before. So, I had some time on my hands. It was also around this period that I first heard the term, NFT. At the time, NFTs were not a household name, and sales of the digital asset were virtually non-existent. Still, it was clear to me, even as an on-chain novice, that NFTs as an asset class and blockchain as an underlying technology, could drastically revolutionize how intangible creations could be regulated, commercialized, and commoditized.
As I thought about how blockchain could ease the inherent complexity of Intellectual Property (IP) and its entrenched system of stakeholders, the NFT boom was about to begin. Fast forward to the summer of 2021, when daily NFT sales surpassed $100 million. Blockchain had become part of the zeitgeist. The only problem: most of these discussions revolved around apes (mutant or otherwise), punks, and doodles. The speculative market was in full swing.
I began writing about the subject, and Marker, a publication on Medium, published my article entitled, Why People Are Paying Millions for Digital Art Anyone Can View for Free Online. This was followed by two more articles focused on blockchain and IP, specifically exploring how NFTs could be classified within the IP ecosystem and whether Web3 could revolutionize music royalties.
The NFT bubble eventually crashed in 2022, with trading volumes falling more than 97% from January to September of that year. While the blockchain space took a reputational hit following this inevitable market correction, Web3 tech itself remained unencumbered and perhaps, unburdened by a dizzying trading market. More importantly, a large swath of speculators and digital hucksters had vanished, leaving behind dedicated, all but exhausted founders, engineers, and builders willing to pick up the pieces. What was left over was a much more pragmatic and professional business environment with more secure and decentralized infrastructure.
In my last article on the subject of IP in Web3, I wrote,
“Artists will always find ways to adapt to the medium of the day, and immersive digital exploitation and consumption is an obvious future.”
I stand by that statement and believe the blockchain space is much better positioned now to serve creators of IP and their underlying assets. Specifically, blockchain can still solve the purposively esoteric nature of IP as an asset class.
There are two blockchain projects that serve as useful examples of how far the Web3 space has come with both platforms offering real-world use cases, where programmable pragmatism becomes a key selling feature.
Story Protocol
Technically, Story Protocol (Story) is a layer-1, purpose-built blockchain offering a decentralized home for the mass proliferation of content on the internet. In other words, Story wants to become the base layer for IP applications, supporting use cases such as provenance and authenticity of IP assets, IP licensing and management, creative collaboration tools, and on-chain royalty distribution.
To make this concept clearer, Story has leaned heavily into the analogy of “programmable IP Lego,” envisioning the internet as an “IP LEGOLAND.” So, if Bitcoin and Ethereum brought programmable money on-chain, Story aims to do the same with IP.
Story, which launched its final testnet, Odyssey, earlier this month, is emerging at a time of enormous disruption to traditional mass media. As Doug Shapiro, an independent consultant to major media brands, wrote in his blog The Mediator, two “tectonic” trends he sees in traditional media are (1) the fragmentation of attention and (2) the waning power of intermediaries. Both such trends fit neatly into Story’s vision of an on-chain IP LEGOLAND built entirely by creators.
According to Shapiro, the fragmentation of attention can partly be explained by the fact that creators no longer have to compete with major studio budgets or traditional measures of “quality” (i.e., expensive production values) to reach audiences.
“When you find an underground artist on SoundCloud, an indie game on Steam, or a creator you find relatable or authentic on YouTube, that’s a fundamentally different experience than consuming professionally produced content.”
More importantly, creators no longer require intermediaries like major studios for the purposes of distribution. Historically, intermediaries extracted most of the value from a creator’s IP because they controlled expensive and complex distribution channels. Technology has largely solved this problem. Shapiro estimates that about a quarter of all time spent with video today is social video (e.g., YouTube and TikTok), with 15,000 hours of Hollywood content produced annually versus 300 million hours uploaded to YouTube each year.
Of course, all this new, self-produced IP needs somewhere to go to be secured, monetized, and distributed. This is where Story hopes to emerge. By leaning into programmable IP, creators can secure their underlying assets on-chain, tap into new liquidity in previously illiquid assets (See: IPFi), and incorporate those assets into an IP repository that can be used to create new or expanded content. The protocol also wants to also act as a framework for capturing and amplifying value in digital culture, especially with memes and other forms of social IP that is native to the network. In theory, this helps drive viral spread, enhance engagement, and foster a creative ecosystem where each new iteration or derivative work adds value to the original IP.
As Co-Founder Jason Zhao says on the company’s website,
“We imagine a future of the next generation of consumer applications that have access to this universal media library of IP. So, when you want to build the next Avengers or the next Smash Bros., you don’t need an entire team of lawyers to generate that IP and remix it. You can actually create those types of IP with a single click.”
Copyright Delta
Could a system designed to benefit a myriad of stakeholders and intermediaries be eliminated by deploying distributed ledger technology for music royalty tracking and distribution? Perhaps the question I posed in 2022 shouldn’t have been whether blockchain could replace the existing music royalty structure, but whether it could be improved upon by incorporating preexisting “traditional” systems. There was always a lingering and persistent issue of a “black box” royalty gap, which required interoperability between existing accounting, reporting, and tracking systems in the current music royalty system and the blockchain. It would be naïve to think that decentralized technology alone could account for all the different stakeholders involved. There is now also the large, looming challenge of GenAI and its impact on existing and future IP.
Copyright Delta won’t be able to solve all the problems of the music royalty system, but it is more focused than most blockchain projects on the self-described boring, infrastructure-layer of music IP.
Music society members, artists, publishers, labels, etc., can digitally sign and upload their lyrics, melodies, and samples onto the white-labelled Copyright Delta platform, which secures and tokenizes these assets. The tokenized proof of creation can then be tracked when AI potentially infringes on these works and can further detect fraudulent uploads to platforms like Spotify and others.
Still, Copyright Delta wasn’t designed to fight GenAI, rather the intention was to attract its use, legally. The company’s AI suite allows creators to “opt in or out” of AI participation, license pre-cleared recordings or songs for training, and set shared revenue splits for the final AI-generated recording or song. The aim is to build a bridge between IP and AI to enable a “consent, credit, and compensate” mechanism for musical works and compositions — all secured, tracked, and made data-sovereign through blockchain technology.
Copyright Delta has already on-boarded IMRO, Ireland’s national music society, and BumaStemra, the Netherlands’ music society, which together represent over 50,000 members of authors and publishers and more than 1 million songs.
The Future
The future of IP on blockchain is less about disruption because disruption of traditional media has already happened. The value chain that once stripped creators of most of the profits from their creations has been revolutionized by technology. Creators now have enabling tools and platforms to interact and transact directly with consumers, which create potent network effects.
With incentives aligned for creators, IP will need a place to go. The issues of provenance, security, monetization, and interoperability of IP assets still remain. This is where blockchain has a significant advantage since its technical foundations can accommodate these disparate needs across the IP asset class.
Companies like Story and Copyright Delta offer vastly different platforms, yet they complement each other in meaningful ways. While music IP is a highly specialized, complex, and bureaucratic space, it could find a natural fit within Story’s digitized ecosystem of IP assets. Additionally, both companies are aligned in their embrace of legal GenAI — securing the rights to the IP used as content for training data and incentivizing creators to share their work.
The blockchain space has been through volatile boom-bust cycles, yet throughout, developers have been building important infrastructure to make Web3 more accessible to creators and their stakeholders. Now, time will tell whether traditionalists and creators will take advantage of what’s already been built and continue to piece together their own IP LEGOLAND.
This publication is not designed to provide legal or other advice and you should not take, or refrain from taking, action based on its content.
